The buyer should always look at the COST of a home, not just the PRICE. The cost is determined by the price and the mortgage interest rate which is available at the time. Below is a list of the interest rates over the last ten years and the impact they have on a $100,000 mortgage payment.
The Federal Reserve announced Thursday that, in an effort to re-ignite economic recovery, it was taking aim at mortgage rates — a move that will likely take rates even lower from their current record lows.
The Federal Reserve announced it will purchase $40 billion of mortgage-backed securities that will help boost the recovery in the housing market. What’s more, the central bank said that it will continue with the purchase program until the economy shows greater improvement, particularly with unemployment.
"These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," according to the Fed in a public statement.
The Fed says the economy still has a long way to go toward recovery. The Fed predicts the jobless rate will stay above 7 percent well into 2014 and that economic growth will remain slow in the coming months.
At its Thursday meeting, the Fed left its funds rate unchanged at near-zero, but announced the rate — which has a bearing on mortgages — would remain at "exceptionally low levels" until at least mid-2015.
As mortgage rates sink lower, home shoppers have been taking advantage. The Mortgage Bankers Association announced this week that mortgage applications for home purchases were up 8.1 percent for the week ending Sept. 7. Mortgage applications for purchases also were up 7 percent from year-ago levels, MBA said.
"While low interest rates impose some costs, Americans will ultimately benefit most from the healthy and growing economy that low interest rates promote," Fed Chairman Ben Bernanke said Thursday following the Fed committee’s meeting.
Source: “Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates,” CNBC
The latest Freddie Mac report shows all-time low mortgage rates, reports the Los Angeles Times. Lenders were offering 30-year fixed loans to credit-worthy buyers at 3.66% and the 15-year fixed mortgage at 2.94%, on average. Here are the specific figures for the week ending June 28, 2012.
- 30-year fixed-rate mortgage (FRM) averaged 3.66% with an average 0.7 point. (Last year’s 30-year FRM averaged 4.51%.)
- 15-year FRM averaged 2.94% with an average 0.7 point, down from last week when it averaged 2.95%. (Last year’s FRM averaged 3.69%.)
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.79% this week, with an average 0.6 point, up from last week when it averaged 2.77. (Last year’s 5-year ARM averaged 3.22%.)
- 1-year Treasury-indexed ARM averaged 2.74% this week with an average 0.4 point, the same as last week. (1-year ARM averaged 2.97% one year ago.)
Foreclosures were also down by 2% in the first quarter of this year as compared to the previous quarter, according to the Office of the Comptroller of the Currency. Year-over-year, the rate fell by 8%. Overall, about 4.5% of all home loans were 60 days or more behind on payments, said the OCC, which is 10% lower than the previous quarter and 6% from one year ago.
Declining interest rates coupled with lower prices may encourage borrowers to purchase homes now rather than later, when the market begins to support higher sales prices. The National Association of Realtors expects the median existing-home price to rise 3% this year and another 5.7% in 2013.